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On the 27th June 2013 the MFSA launched the new Investment Services Rulebooks which effectively transposed the AIFMD into the MFSA’s Rules.

In terms of the AIFMD and the current Investment Services Rulebooks, entities which carry out depositary functions as part of their professional or business activities could, with the approval of the MFSA, be appointed to act as custodians of the following types of AIFs:

AIFs which have no redemption rights exercisable during the period of 5 years from the date of the initial investments; and

which in accordance with their core investment policy, generally do not invest in assets that must be held in custody in accordance with their core investment policy, or generally invest in issuers or non-listed companies in order to potentially acquire control over such companies.

As the phrase “carry out depositary functions as part of their professional or business activities” is not deemed to provide an adequate level of certainty as to which entities could be appointed to act as custodian for the above mentioned AIFS, on the 18th of September 2013 the MFSA issued a consultation document specifically addressing and clarifying, what has been called, the ‘depositary lite regime’.

The document provides that the following licenced entities will be allowed to provide the services of depositary lite:

Recognised Fund Administrators; and

Category 2 Licence Holders [MiFID Investment Firms]

This would however be subject to the said entities adhering to a minimum own funds requirement amounting to €125,000 and obtaining a Category 4 Licence to provide solely and exclusively the prescribed activities.

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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